It has been about a month since the last earnings report for Carlisle (CSL). Shares have added about 1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Carlisle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Carlisle Q2 Earnings & Revenues Top Estimates, Up Y/Y
Carlisle reported better-than-expected second-quarter 2019 results, delivering a positive earnings surprise of 11%.
The company’s adjusted earnings were $2.62 per share, surpassing the Zacks Consensus Estimate of $2.36. Also, the bottom line increased 33% from the year-ago quarter figure of $1.97.
Inside the Headlines
In the reported quarter, Carlisle’s net sales were $1,314.8 million, up 6.4% year over year. The improvement was driven by 2.3% contribution from organic sales growth and 4.7% benefit from acquired assets, partially offset by 0.6% adverse impact of foreign currency translation
The top line surpassed the Zacks Consensus Estimate of $1,312 million.
The company reports results under four segments —CCM, CIT, CFT, and CBF. The quarterly segmental results are briefly discussed below:
Revenues from CCM totaled $915 million, increasing 10.4% year over year. It represented 69.6% of net sales. Organic sales and acquired assets had a positive impact of 4.7% and 6.1%, respectively. These were partially offset by 0.4% adverse impact of forex woes.
CIT revenues, representing 18.7% of net sales, were $245.4 million, up 3.2% year over year. The improvement was driven by 2.2% growth in organic sales and 1.6% benefit from acquired assets, partially offset by 0.6% adverse impact of unfavorable movements in foreign currencies.
CFT revenues, representing 5.1% of net sales, were $67.3 million, down 8.2% year over year. In the reported quarter, organic sales declined 11.7% while forex woes had an adverse 2.4% impact. However, acquired assets had a positive impact of 5.9% on sales.
CBF revenues were $87.1 million, decreasing 9.7% year over year. It represented 6.6% of net sales. Organic sales declined 7% while unfavorable movements in foreign currencies had a 2.7% adverse impact.
Operating Margin Improves Y/Y
In the reported quarter, Carlisle’s cost of sales jumped 1.8% year over year to $920.6 million. It represented 70% of net sales compared with 73.1% a year ago.
Selling and administrative expenses increased 7.8% to $172.3 million. It represented 13.1% of net sales compared with 12.9% in the year-ago quarter. R&D expenses totaled $15.4 million, up from $14.2 million.
Operating profit was $207.2 million, up 29.7% year over year, while margin expanded 290 basis points to 15.8%. Margin benefited from improved sales volume, Carlisle Operating System and price realizations. These were partially offset by wage inflation and acquisition- related charges.
Balance Sheet and Cash Flow
Exiting the second quarter, Carlisle had cash and cash equivalents of $422 million compared with $803.6 million recorded on Dec 31, 2018. Long-term debt was $1,589.4 million compared with $1,587.8 million at the end of 2018.
On a segmental basis, sales are anticipated to grow in a low-double digit range for CCM, in a mid-to-high single digit range for CIT, mid-single digit range for CFT. However, for CBF, the company expects sales to be down in a mid-single digit range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
Currently, Carlisle has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Carlisle has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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